Purpose This paper aims to explore the effects of social trust and intermediary organizations on the price at which large-scale production units (LSPUs) rent a plot in rural land markets and to uncover the underlying causal mechanisms driving these effects. Design/methodology/approach Based on an LSPU- and plot-level dataset from Jiangsu and Jiangxi Provinces in China, OLS regressions are estimated alongside treatment-effects and control function models that consider the potential endogeneity of intermediary involvement. Findings Our results imply that LSPUs with higher levels of social trust and those renting plots through intermediary organizations tend to reach higher land rental prices. Moreover, trust and intermediary involvement complement this process. We also verify that the positive effects of trust and intermediary involvement on land rental prices can be attributed to a reduction in transaction costs. Originality/value First, this is the first to integrate social trust and intermediary involvement within a unified framework to reveal their combined effects on land rental prices. Second, the underlying mechanism is revealed through the lens of transaction cost economics, addressing a gap overlooked in previous studies. Third, it provides a critical demand-side perspective by centering the analysis on LSPUs, countering the predominant supply-side bias in the field.
Li et al. (Fri,) studied this question.